Singapore LNG seeks spot cargoes for first time

Singapore LNG is seeking two LNG cargoes on a spot basis for the first time, following an unprecedented surge in gas prices, made more pressing by the city-state relying mainly on natural gas to generate its electricity.

The firm is looking to buy two cargoes for delivery in November to the 11mn t/yr Jurong terminal on a bilateral basis, market participants said.

Natural gas has accounted for over 90pc of Singapore's power mix since 2013, according to statistics from power regulator the Energy Market Agency (EMA). While pipeline gas from two of the country's closest neighbours Malaysia and Indonesia traditionally provided most of Singapore's natural gas needs, the opening of the Jurong terminal in 2013 has enabled Singapore to import more LNG from other international providers.

It is unclear why Singapore LNG is seeking spot cargoes with the rally in natural gas prices, especially on a prompt basis. Indonesia is expected to halt piped gas supplies to Singapore via the country's Corridor block in south Sumatra by 2023, the Indonesian energy ministry said last year.

The four LNG importers in Singapore appointed by the EMA are Shell, state-owned subsidiary Pavilion Energy, ExxonMobil and utility provider Sembcorp Power.

Spot prices surge

Spot LNG prices have surged since the beginning of this year as low underground gas storage levels in Europe, coupled with northeast Asian buyers stocking up for the winter season well in advance, have led to increased competition for the same pool of cargoes available.

The ANEA price, the Argus assessment for spot prices to northeast Asia, rose to a record high of $42.095/mn Btu for first-half November deliveries on 6 October this year, more than seven times the price over the same period in 2020. It also surpassed the previous record of $39.72/mn Btu set earlier this year.

The Argus ASEA price for southeast Asia deliveries, derived via a freight netback from northeast Asia, was last assessed on 14 October at $35.14/mn Btu for first-half November and $35.18/mn Btu for second-half November. This was $3.41/mn Btu and $3.27/mn Btu higher than two weeks ago respectively.

Market participants expect new records to be set in the coming weeks and months as buying activity from within and outside Asia firms ahead of the northern hemisphere winter season. Gas storage inventories in Europe also remain low at only about 78pc full compared to well over 90pc during the same period in previous years, according to statistics from European gas association Gas Infrastructure Europe.

Higher spot LNG prices have created obstacles to independent power retailers in Singapore. Singapore Power supplied electricity to the whole of the city-state until The Open Electricity Market was launched in 2018 by the EMA, in a bid to give Singapore power consumers a larger range of electricity retailers to choose from and to increase competition and efficiency in the industry.

One of Singapore's largest independent electricity retailers iSwitch Energy has announced it will halt electricity retail operations on 11 November.

By Rou Urn Lee and Subethira Ahrumugam